Unsecured Personal Loans – Borrow As Per Your Needs
Unsecured personal loans are specifically meant for smaller loan amounts to be used for personal purposes. One feature is that these are fully risk free for any borrower in the sense that no collateral or security needs to be offered up for the loan to be approved. They also have the advantage of using the loan for improving credit ratings by repaying the loan on time as per the loan agreement that was signed. As your credit rating improves it is easier to qualify for the loans and lenders will be willing to offer the most competitive loan rates available. This last point is very important. Not only can you find loans easier, you can also save hundreds or thousands of dollars depending on the size of your loan with lower interest rates based on a good to excellent credit rating.
What is an Unsecured Personal Loan
The important thing to remember about unsecured personal loans is that they are unsecured. In other words borrowers do not need to offer anything other than their personal word that they will repay the loan on time as per whatever agreement that they signed. Unsecured personal loans may cost more than secured loans in terms of interest rates; however secured loans will be registered as a lien against your property or whatever is provided as collateral until the loan is fully repaid.
Once a secured loan is repaid, consumers need to make sure that the lien is removed from the property that was offered as security. If your home was used as security for the loan, you may have to hire a lawyer to arrange to remove the lien against your house. This is an additional expense that secured loans have and unsecured loans do not have. Unsecured personal loans do not have any of these issues. All you need from the lender once it is paid is a simple statement showing a zero balance on the loan and that all of your fees and expenses for the loan, if there are any, have been paid in full.
What Can they Be Used For
Unsecured personal loans can be utilized for many different reasons by consumers as well as business owners. These loans may be used to consolidate credit card debt. They can be used to pay for upgrades around your home including renovations to your home and outdoor space. Sometimes consumers need to pay for emergency expenses such as a furnace replacement, a new roof or repairs to their car.
They also use personal loans to pay for trips and excursions to other countries. The point is that these personal loans can be used for whatever your needs are. Many consumers will take out a loan when they purchase a car. What they may not realize is that this loan is usually a secured loan with your car that you just purchased being used as the security for the car. If for any reason you fail to make all of the payments on the car loan, the lender has the right to repossess your car and sell it to recover the balance of the loan and the interest that is remaining.
What Does the Lender Need
The lender on the other hand only really cares about your ability to repay the loan and your history as a credit worthy customer. Your credit rating will give the lender some idea of what kind of risk each consumer is and how likely they are to repay their loan. Poor credit ratings usually indicate that there was some problem in the past which may give the lender some cause for concern regarding how risky it would be to lend you money.
The lender also looks at your ability to repay the loan. They often will assess the other debts that you may have and your income each month. Basically they are trying to assess if you have enough spare cash to pay your loan on time each month. They may ask for copies of your pay stub to substantiate your income and they may ask for copies of your bank statements to substantiate your bank account.
Another Special Type of Personal Loan
A line of credit is one type of unsecured personal loan that carries a relatively low interest rate which can be treated as an overdraft. This type of loan can be drawn on at any time up to a pre-approved limit and then repaid at any time. Lenders usually require that the interest each month be paid as the minimum payment. Borrowers can pay the entire loan off, a smaller monthly payment or only the interest that has accumulated in that month.
In order to remain in good standing with the lender and not trigger any concerns, borrowers should always pay at least the interest accrued during the month. Obviously if you can repay the loan in full or at least a substantial amount, there will be less total interest to pay and the cost of the loan will be much less.
Unsecured personal loans are very flexible and can be used for just about any purpose. They work well for consumers who may not have the ready cash at the moment and need to have funds to pay for something they need in their lives.
Should Consumers Use a Broker to Find a Personal Loan Lender?
Many consumers just go to their local bank and make arrangements to borrow money at whatever rate that the bank is offering. A broker on the other hand will canvas all of the lenders he or she deals with, which includes the banks, to find the best interest rate and terms available.
It is their daily job to be aware of which lenders have the best deals and can offer the best rates. They are in the job of connecting lenders with pre-approved borrowers for personal loans and many other types of loans. For their efforts they are paid a finder’s fee by the lender for bringing them a pre-qualified borrower. There is no extra cost to the borrower in situation such as this. If a broker is charging a fee for their services, it may be time to find another broker unless you have special requirements that you are willing to pay for.
Brokers are dealing with many lenders and borrowers at the same time, so you may need to make a decision relatively quickly. Sometimes money that is available at a very competitive interest rate will be taken by other borrowers. If you feel that you have a really good interest rate compared to your bank or other lenders, snap it up quickly.